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Gulf-Times (Qatar): House okays Mexico Gulf drilling law

Publish Date: Sunday,10 December, 2006, at 09:47 AM Doha Time 
 
WASHINGTON: The House approved legislation allowing oil and gas companies like ExxonMobil Corp and Royal Dutch Shell Plc to drill in untapped, federally controlled areas of the Gulf of Mexico.

The House voted 367-45 for a tax measure that includes a proposal to expand drilling in the gulf by 8.3mn acres, a 20% increase, and give states a share in royalties from the oil and gas produced off their shores. The area is estimated to hold 1.26bn barrels of oil and 5.8tn cu ft of natural gas.

“It’s a small step in the right direction,’’ Ben Lieberman, senior policy analyst for the Heritage Foundation, said yesterday. “It would be the first signal that Congress is serious about expanding energy exploration.’’

The vote resolves an impasse between House and Senate members over how to expand drilling in federally controlled waters off US shores, in an area known as the Outer Continental Shelf.

House members gave up on their own proposal to allow all coastal states to opt out of federal moratoria on drilling, instead inserting language from legislation the Senate approved August 1.

The tax measure must still receive approval before the Senate adjourns sometime over the next several days, ending Republican control of Congress. The measure stands a 50-50 chance of winning Senate approval, Senate Democratic Leader Harry Reid of Nevada said yesterday.

Critics say the drilling measure will do little to add new US oil and natural gas supplies, and puts too much acreage off-limits for future development by extending a 100-mile buffer zone off the coast of Florida.
 
The legislation also prevents some areas from being drilled through 2022. Under the Interior Department’s current five-year plan, 5.9mn of the 8.3mn acres were already scheduled for industry bidding in Lease Sale 181.

The legislation requires 2.5mn acres of the area to be offered to oil and gas developers by the Interior Department’s Minerals Management Service within a year of becoming law.

“The MMS sale in September 2007 will offer much of the same acreage,’’ Kevin Book, a policy analyst for Friedman, Billings, Ramsey Group Inc, wrote in a note issued on Thursday.

Supporters of the legislation say it will help stabilise gas prices, which have more than quadrupled since 2002, and will provide states for the first time with a 37.5% share in offshore federal royalties.

The royalties could provide $1bn a year by 2017 to be shared by Louisiana, Texas, Mississippi and Alabama. Louisiana alone could get a total of $20bn over 30 years, according to Adam Sharp, spokesman for Democratic Senator Mary Landrieu of Louisiana.

Representative Edward Markey, a Massachusetts Democrat, said the revenue sharing would mean “$170bn is going to be transferred from the pockets of the American taxpayers, 46 states, and transferred to four states.’’

The House on Friday rejected Markey’s attempt to amend the legislation to include a requirement that companies signing new leases must re-negotiate prior Gulf of Mexico leases that failed to include royalty triggers.

Other energy-related tax measures in the legislation include a one-year extension if production tax credits for wind, solar, biomass and other alternative energy supplies. It also extends until 2009 a $0.54 a gallon tariff on imported ethanol, which was set to expire in 2007.

President George W Bush has expressed support for the legislation and issued a call after last month’s elections for Congress to send the measure to his desk for a signature this year.

Lawmakers, facing new Democratic majorities in the House and Senate, say they will attempt a more expansive offshore drilling policy when Congress starts in next session in January.

Companies with a likely interest in the drilling areas opened by the legislation include two of the world’s largest oil companies, ExxonMobil and Shell, as well as Chevron Corp, Kerr- McGee Corp, Devon Energy Corp, Anadarko Petroleum Corp, and Dominion Resources Inc, Tom Moskitis, managing director of external affairs for the American Gas Association, said in a December 4 interview. – Bloomberg

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